America Movil to break up ahead of antitrust laws

Mexico City - Billionaire Carlos Slim is bowing to imminent antitrust legislation by planning a breakup of America Movil's phone operations in Mexico rather than risk profit-crushing restrictions if his company did nothing to curb its dominance.

America Movil, the Americas' largest operator with 272 million wireless subscribers, decided to divest some assets to an independent company, reducing its market share in Mexican landlines and mobile phones to below 50 percent to appease regulators, America Movil said Tuesday in a filing. Slim's carrier will also separate its wireless towers from the rest of the business and will renounce its rights to acquire control of satellite-TV provider Dish Mexico. Slim and his family hold 57 percent of America Movil.

Slim, the world's second-richest man and the son of a Lebanese immigrant to Mexico, had been weighing options for America Movil as Congress considered a bill that would impose the harshest penalties the company has ever encountered, as long as its subscribers represent more than half of the Mexican market. The carrier currently has 70 percent of Mexico's mobile- phone subscribers and about 80 percent of landlines. America Movil has lost about $17 billion in market value since President Enrique Pena Nieto took office in 2012 on promises to spark more competition to boost the Mexican economy.

"The message is clear: They're reacting to the regulatory pressure," said Julio Zetina, an analyst at Vector Casa de Bolsa SA in Mexico City. "I'm surprised they have made a decision like this, and so quickly."

America Movil didn't specify which assets would be sold to the new independent operator. It said they would have to fetch market prices.

In a radio interview Wednesday, America Movil Vice President Arturo Elias said the company won't just sell rural, money- losing phone lines. America Movil is still analyzing which assets to sell and prefers a single buyer to create a strong competitor, he said. He also said that the assets for sale will "require much investment."

America Movil may fetch about $8.6 billion by selling assets and will need to divest about 21 million wireless users and 4 million landlines to reduce its market share below 50 percent, Martin Lara, an analyst with Corp. Actinver, estimated in a note Wednesday. Grupo Televisa may be a potential buyer for some of the assets, Lara wrote.

America Movil brought a special committee of board members together to study its options after the newly created Federal Telecommunications Institute, or IFT, declared it the dominant company in Mexico's phone market. Last year, lawmakers made constitutional changes to let regulators force companies to divest assets if they have too much control over the industry.

The board made the breakup decision based on the committee's recommendations, America Movil said Tuesday. The measures require regulatory approval and may need the endorsement of shareholders, the company said.

America Movil contacted the IFT with its plans to restructure, which will be subject to approval, the regulator said in a statement. The IFT said it has yet to receive a concrete plan.

"This decision is a direct consequence of the regulatory framework created by the telecommunications reform," the Communications and Transportation Ministry, which reports to Pena Nieto, said in a statement Tuesday. "This decision may transform the conditions of effective competition in the telecommunications sector, with greater quality and better prices for services to end users."

Pena Nieto's press office declined to comment.

"The mere announcement by America Movil that it will divest assets to stop being dominant is already a major success of the telecom reform," Javier Lozano, head of the Senate's communications and transportation committee, said in a Twitter post.

Selling the Mexican wireless towers, and leasing them to serve mobile-phone customers, would give America Movil cash to pursue new investments. Phone companies from Dallas-based AT&T Inc. to Rio de Janeiro-based Oi SA have sold towers in the past year to raise funds. If America Movil sold all of its 40,000 towers across Latin America, not just Mexico, it could raise $10 billion, Macquarie Group Ltd. said in a note last week.

Wednesday, Mexican lawmakers approved the bill that will force America Movil to share parts of its network and eliminate the fees it charges other operators to connect calls to its customers. All operators are banned from charging long-distance fees starting next year and have to stop making unauthorized promotional calls to users. America Movil would have to abide by the rules for 18 months before it can request a license to offer TV service in Mexico.

Mexico's lower house voted 318 to 107 Wednesday in favor of the bill, which was passed by the Senate over the weekend after more than six months of delays and legal challenges. The law will need the endorsement of Pena Nieto.

The bill says Slim can loosen the restrictions by presenting a plan to regulators to reduce America Movil's market share below 50 percent.

Under the proposed law, the company would have 365 days to implement a breakup plan, after which the regulator would review whether it has worked. During that span, America Movil would still be subject to its restrictions as the dominant carrier.

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